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ABB's Sale of Equity Holdings
May Help Shore Up Finances

By

Dan Bilefsky Staff Reporter of The Wall Street Journal

Updated Sept. 3, 2003 12:01 a.m. ET

ABB Ltd.
said it is selling its equity stakes in power plants and infrastructure projects it owns around the world, a move analysts say could raise up to $500 million (&euro;456.1 million) and make a small dent in the Swiss-Swedish engineering company's $8.3 billion debt load.

ABB said the planned sale of the investments, which include a 50% stake in a giant Moroccan power plant called Jorf Lasfar Energy Co. and big stakes in South Africa's Kruger Mpumelanga International airport and an Australian power station called Red Bank, is part of its strategy of divesting itself of noncore assets. It said the stakes were acquired by its now-defunct equity-ventures unit, a part of its financial-services arm that invested in infrastructure projects.

"Selling off these businesses is another piece of the puzzle to become a leaner company and reduce our debt," said Thomas Schmidt, an ABB spokesman, adding that negotiations are already under way and there is no deadline for the sales.

Analysts said the move is the latest sign the company is determined to shore up its balance sheet. Last week, ABB's share price soared after it said it would raise one billion francs ($703.45 million, &euro;650.8 million) through a convertible-bond issue. The bond deal -- which will allow ABB to trim its interest bill but does nothing to reduce its debt -- was welcomed by investors as another signal the company is on the rebound.

A former superstar that played in the big leagues of General Electric Co. of the U.S., Z&uuml;rich-based ABB last year came close to the brink of collapse due to crippling asbestos liabilities incurred by a U.S. unit that insulated its boilers with the cancer-causing agent. ABB has been selling assets in order to refocus on its core industrial-automation and power-transmission activities.

Industry insiders said the stakes are likely to be gobbled up by an investment company such as Candover Investments PLC of the U.K. or a big industrial company looking for undervalued assets. Candover was unavailable for comment.

In July, ABB sold half of its buildings-system division, which provides building maintenance for companies, to Finnish construction company
YIT Corp.
for $233 million. In September last year, it sold its structured-finance unit, which provides loans to companies for infrastructure projects, to GE for $2.3 billion.

ABB also is in the process of selling its petrochemicals unit, which provides exploration equipment for the oil industry. According to people familiar with the situation, the unit will be sold for about $1 billion to a consortium led by Candover and the private-equity arm of U.S. investment bank
J.P. Morgan Chase
& Co. These people said the sale is dragging on because the deal has to be approved by at least four different parties.

ABB faces some big challenges. Its debt, which it promised to cut to $6.5 billion by year end, grew to $8.3 billion from $8.2 billion in the second quarter this year. and even if the oil-and-gas division is sold for $1 billion, analysts predict an equity issue is likely to raise more cash. Mr. Schmidt, the ABB spokesman, said the company is examining "all its options." Asbestos also remains an unresolved issue. A final $1.2 billion settlement of ABB's asbestos liabilities is still winding its way through the U.S. court system and could be derailed on appeal.